Thursday, May 3, 2007

The Fundamental Law of Economics Strikes Again

I discovered my own Fundamental Law of Economics in the course of my first job, teaching computer science at the Technion in Israel. I arrived in the fall of 1971, which was an interesting point in Israeli history. The success of the 1967 war became a major boost for Israel's appeal, particularly in light of their tacit agenda to attract Jews into the population from all around the world. There was a general sense of peace and security; and, when I left at the end of the summer of 1973, I do not think that anyone could anticipate what would happen only a few months later. What was more important was that the peace and security and sown seeds of economic prosperity, and those seeds were just beginning to yield fruit.

I discovered that the best place to examine the impact of economic progress was on the kibbutzim. These had been conceived as utopian models of communal living, where everyone (including the highest of the governmental leaders) shared in doing everything. Indeed, because both parents participated in the labors of the community, children spent most of their time in child care centers away from their parents. Had this not been a brain-child of "the Jewish state," the United States would probably have condemned it as "godless Communism;" but, as we all know, most of our evaluations have more to do with peer pressure than with "the merits of the case!" Nevertheless, when prosperity began to come to the kibbutzim, it was accompanied by an interesting shift in economic policy: People started talking about wanting to have their own private property and about finding "fair" ways to distribute profit to those "most responsible" for bringing profit into the economy. It was from observing this shift in social philosophy on the kibbutz that I formulated my Fundamental Law of Economics:

People are willing to share poverty, but they would prefer to keep wealth.

I was reminded of this Law while reading the Al Jazeera account, based on their wire sources, of the debates over the preparation of the final report of the Intergovernmental Panel on Climate Change. Now that the panel has addressed questions of problems and solutions, the real debate is coming down to cost. The "big 100,000-pound gorilla in the room," as one of the delegates put it, is asking two painful questions:

  1. How much is this all going to cost?
  2. Who will be paying how much of that cost?

What most interests me about the debate is that China appears to be expressing the most concern over how these questions get answered. I find this ironic because, as we have seen from recent financial news, China now seems to have more wealth than they know what to do with; and applying that wealth generously to the climate crisis can be argued from positions of the theories of both communism and market-based capitalism:

  1. The communist perspective lies in the heart of that famous sentence in Karl Marx' "Critique of the Gotha Program" (which, according to my Bartlett's can be traced back to either Louis Blanc or Morelly): "From each according to his abilities, to each according to his needs." China now finds themselves in a situation where they are almost luxuriously endowed with abilities of both material and human capital. In that situation they are now confronted with a need of global proportions. By all rights their communist ideology should tell them to pitch in without giving the matter undue thought, which can only waste time in the face of urgency.
  2. On the other hand market-based thinking argues that you are not going to profit from a market that is, for all intents and purposes, wiped out by a global catastrophe. In other words you need to invest in keeping your markets. If you fail to do so, then you will no longer reap profits from those markets.

Nevertheless, both of these lines of reasoning are apparently trumped by that Fundamental Law of Economics. Now that China has wealth, it wants to be "the decider" (the epithet is irresistible) over what it does with that wealth, whatever the needs of the world population may be. I say this not to point an accusatory finger specifically at China, because we all know that the United States feels no differently about its wealth, nor, for that matter, do any of the countries in the European Union.

(Just this morning NPR ran a story about energy conservation in England. They interviewed one guy who said that he bought his gas-guzzling SUV "because I can." This is part of the mind-set of prosperity, whether we like it or not.)

The only way the Fundamental Law of Economics can be transcended is through a deliberate act of will on a global scale. Yesterday, I recalled Vonnegut having observed in his fiction that the will is no longer there. In that post the question involved ethical behavior. Today's news reminds us that it is also a question of global survival.

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